Maharashtra government has invited Elon Musk’s Tesla, the US electric-car maker, to the state. Earlier even the Karnataka state government offered them to set up a plant in the aforementioned state of India.
On twitter, Elon Musk had hinted that the company could make a venture into India in 2021. “Next year for sure” Musk had said on Twitter in reply to a post with a photograph of a T-shirt with the message: “India wants Tesla”. (tweeted by Tesla club India)
Tesla’s entry into India could become a reality very soon as Prime Minister Narendra Modi is increasingly focusing on promoting the use of electric vehicles in an environment friendly address to his ‘mitron’ – the citizens of India.
How much is Tesla worth globally?
At the beginning of July of 2020 tesla’s market cap which is another way of saying the value of tesla surpassed Toyota’s for the first time ever making tesla the most valuable car company in the world. tesla is worth more than 382 billion US dollars or 28 lakhs close.
That’s more than fiat Chrysler, ford, Ferrari, gm, Honda, BMW and Volkswagen combined. And if we’re looking at companies outside of the automotive industry tesla is worth more than companies like Walmart, Disney, nestle, intel, Samsung, PepsiCo, Coca-Cola, McDonald’s, Nike.
Tesla is currently number 12 in the world in terms of valuation. they have factories in the united states, china, Germany, and the Netherlands. and you can buy them in all of those countries along with other countries like Canada and Mexico. pretty much everywhere.
But there’s one country that I didn’t mention on that list it’s a country where 17 of the world’s population lives a country that’s home to 3.5 percent of the world’s wealth that’s 12.6 trillion dollars or 9.35 crores. It’s a country where the third highest number of billionaires live including Asia’s wealthiest man Mukesh Ambani. If you haven’t guessed already the country that I’m talking about is India.
Why doesn’t tesla have a presence in India? Well there’s actually a couple of very good reasons.
Firstly, let’s talk money the cheapest tesla on the market right now – the model 3 without any of the bells and whistles- that tesla’s are known for cost 37,990 us dollars. So without factoring in costs like shipping and import tax that means that the base model 3 costs 28 lakh rupees. That’s 2.8 million rupees! If you’re Indian, then you already know just how much money that is but if you’re not allow me to provide you with a bit of context.
India’s GDP per capita in 2020 which is another way of saying the average annual income of an average Indian is 1.76 lakh rupees or 2,338 U.S dollars. So for the average Indian person if you ignore expenses like food, rent, transportation, phone bill and you ignore GST and other taxes on the tesla for example the insane import tax, it would take more than 16 years to save up enough to buy a tesla.
Now compare that to the situation over in the united states where the average annual income is a little bit more than 65,000 US dollars a year or 48 lakh rupees. With that kind of GDP per capita the average American in a hypothetical expense free world would be able to afford a tesla in just seven months.
In other words, if teslas were available in India then the average Indian would need to work 27 times harder than the average American to afford one and the situation is pretty similar across the board in other countries where teslas are available.
Why is Tesla targeting other developing nation markets while continuing to ignore India, even if they are of thee similar financial status?
Well the answer lies in these countries wealth distributions. In other developing countries similar to India, namely Jordan there’s only one tesla store and it’s located in the country’s capital which is where a majority of the country’s wealthiest people live. It’s also been referred to as the Silicon Valley of the middle east because it’s one of the best cities in that part of the world to launch a tech start up.
Next we’ve got Mexico which is in the same situation as Jordan. there’s only one tesla store and it’s located in the country’s capital. Then we’ve got china where yes for the average Chinese person it takes four years to buy a tesla but for the average Hong Kong citizen it only takes nine months. And in Macau it takes six.
The wealth pockets of these countries makes it worthwhile for tesla to operate in these countries. So let’s try to do the same exercise with India.
Where are the wealth pockets of India located and can the people living in those pockets afford teslas let’s find out?
In India where the GDP per capita as of 2016 was more than 3735 us dollars or a little bit more than 2.5 lakh rupees with 2016’s conversion rates now that’s quite a bit higher than the 2338 us dollars or 1.76 lakh rupee GDP per capita. In fact, it’s a 37 percent increase since then until of course the nation was hit by a lockdown induced by the corona virus pandemic.
But even with that difference India is still behind the poorest country that tesla operates in- Jordan which at the time had a GDP of 4,103 us dollars. But then again Jordan’s population is somewhere in the ballpark of 10 million people that’s 100 lakh people. Some of India’s cities have more people than that Jordan has less than one percent of the population of India.
So when you take economics of scale into account even if tesla only set up one store in India’s wealthiest city Mumbai they would probably still earn more from India than they do from Jordan. At least if you ignore all of the other factors that are keeping tesla out of India.
What are the other factors keeping Tesla out of India, except the monetary issue?
Well now that we’ve unpacked money let’s talk a little bit about infrastructure. I specifically want to talk about two of India’s major inadequacies when it comes to accommodating luxury electric vehicles like teslas: crazy roads and charging stations.
I’ll start with crazy roads. As of April of 2019 all of tesla’s vehicles come with autopilot pre-installed. This is a feature suite designed by tesla. Specifically, for their vehicles and it includes advanced driver assistance features like lane centring, traffic aware cruise, control self-parking, automatic lane changes, semi-autonomous navigation on limited access freeways and the ability to summon your tesla from a garage or parking spot.
If you’re Indian, then you know very well that in India none of these things are guaranteed and more often than not even in India’s major cities these things just don’t exist. A lot of the time painted lanes on roads are uncommon and when they’re, people don’t often use them. Parking lots aren’t really a thing and parking spots are basically wherever you can find a spot on the side of the road or up on the sidewalk.
And then when it comes to the speed limit a lot of people literally cannot meet it because they’re driving underpowered vehicles or they’re being pulled by animals like horses or oxen. Speaking of animals, they are everywhere on the roads and so are people and tons of other obstructions like insane speed breakers and potholes that kill hundreds and hundreds of people every single year.
India has roughly 250 charging stations now. India has sold barely 8,000 electric cars in the last 6 years and just to give you guys a bit of context, china sells more than that in two days. That means that for every charging station in India there are just 32 electric cars which seems great.
If you compare that to the ratio of petrol pumps for combustion engine cars which is 500 to 1 then it looks like there are more than enough charging stations to go around. Well not really.
See this isn’t just a numbers game it’s also a distribution game. There are several states which don’t have a single charging station and for the states that do, a majority of these stations are located in the metros like Bangalore, Delhi and Mumbai.
Now compare that to the situation over in the united states. There are more than 20,000 charging stations across the united states and if each of the plug points at all of these charging stations were being used simultaneously America’s charging stations would be able to charge 68,800 EVS at once and this is just the united states.
I’m not making this distinction to bash my nation India rather I’m trying to highlight just how much money tesla would need to invest in India to make their entry into the Indian market.
My last point: here the biggest reason why tesla hasn’t entered the Indian market.
Because of the Indian government and its local protectionist policies. The issue here is India’s insane import tax for cars that cost more than 40,000 us dollars or 30 lakh rupees. Import tax is 100 and if the vehicle costs less than 40,000 then the import tax is 60. Either way that’s a pretty hefty bill for tesla or Indian consumers to foot.
The purpose of this tax is to keep competition out of India, why?
Well the Indian government has dreams of making India the world’s leading producer of electric vehicles. In fact, India’s minister for road transport and highways Nitin Gadkari said that he was confident that in five years India will become the number one hub for manufacturing electric buses, cars and two wheelers.
There is also a blessing in disguise that majority of countries are not interested in dealing with china anymore. So now there is a huge potential for India. So the way that the Indian government sees it in order for India to dominate the global EV market.
It needs to protect its local EV market from heavily funded and highly competitive outsiders namely the united states and china and so it’s effectively barring entry to those countries by making imported EVs so expensive that Indian consumers just don’t want to buy them. Unfortunately for Elon Musk tesla and all of the Indian people who want to own teslas without paying double for them the Indian government wants to keep India’s EV market Indian.
But there is a way forward for tesla actually. the way I see it there are three ways.
The first is policy reform according to Elon Musk’s tesla usually funds the construction of its factories using the money that it made from selling teslas in the country where the factory will be located. Of course the problem here is that tesla cannot sell teslas in India because they won’t make any money from them because of the import tax. No money equals no factory.
What if the Indian government were to make an exception?
For example, the Indian government could reduce or even waive these taxes. On a case-by-case basis for EV manufacturers who are willing to commit to building factories and charging stations in India this would be a win-win for both India and foreign EV manufacturers and tesla had already said back in 2016 that they would like to install an India-wide network of supercharging stations which is something that they have done in the past with countries where they have a presence.
These charging stations though designed for teslas would be able to be used by other EVS as well yes the Indian government would be allowing some non-Indian competition into the market. But they would be doing so in an effort to accelerate the growth of that market and let’s face it if India wants to overtake china and the united states as an EV manufacturer they’re going to need to speed things up.
Another option would be for tesla to take a completely different approach offering energy solutions to Indians via tesla. In case you don’t know this tesla doesn’t just make cars and short shorts they also make solar panels and massive storage batteries for homes corporations and even cities.
Now again if you’re not from India then you might not realize this but constant reliable energy doesn’t really exist here and for a majority of the country’s population regular power cuts usually daily are just a way of life. As someone who lives in India i’ve experienced this first hand more than once.
According to the world bank in 2016 India lost an estimated 86 billion dollars that’s about four percent of the country’s GDP due to the power sector’s shortcomings and this could be a huge opportunity for tesla.
Third one could be a game changer: cyber bike or better yet cyber auto-rickshaws. Tesla is one of the world’s biggest manufacturer of Electric Vehicles. In India also there is a large number of fans of Tesla. When a lot of people asked on twitter that when will Tesla come to India? Elon Musk Tweeted, Well, 2019 is gone, now we need to see whether or not Tesla will Enter the Indian Market in 2020.
Tesla coming and setting up factories in India will not only give us opportunity to experience luxury but also provide employment and revenue to the daily wage workers and many unemployed yet qualified youth of the nation. India will also benefit financially and above all a step towards Globalisation and its perks.